Morning. In focus this week, we’re ringing up this morning’s consumer price index, playing armchair central banker and wheeling back into BlackBerry earnings.
Up first
In the news
Energy: The federal government will announce today that its nuclear strategy aims to have 10 new large-scale reactors built in Canada.
Automaking: Contract negotiations between Ford Motor Co. and Unifor begin today against a backdrop of automotive tariffs and questions about the future of the North American trade agreement.
Defence: Canada has signed an agreement with Australia for a $2.5-billion over-the-horizon radar system to track potential threats entering Canadian airspace in the North.
Good dogs. More on the fur-real new frontier in pet-friendly home design below.Kayla Daniels/Supplied
In focus
This week’s watch list
1. Price check: Canada’s annual inflation rate might have climbed above 3 per cent in May, a bump expected in Statistics Canada’s report later this morning. That follows a 2.8 per cent rate in April, which was the highest level the country has seen in nearly two years.
The primary driver of the recent pickup is rising energy costs – specifically gasoline prices driven by continuing conflicts in the Middle East.
But food price inflation, which slowed from 4 per cent in March to 3.5 per cent in April, is expected to show signs of speeding back up to 3.8 per cent in the upcoming May report. Wrong way, food!
2. Rockets and feathers: Geopolitical volatility keeps the energy outlook highly unpredictable. While global oil futures fell last week on news of a newly signed U.S.-Iran peace deal, persistent ground conflict continues to rattle the markets.
High-level negotiations in Switzerland seeking a permanent stop to the Iran war have ended, mediators said early on Monday, while technical talks will go on for the rest of the week.
Recent Israeli military strikes on Hezbollah targets in Lebanon have raised fears that the broader diplomatic breakthrough could fall apart. The fighting could keep actual physical supplies tight, dampening any remaining expectations of a quick return to pre-war oil prices.
While traders can pivot instantly on headlines, relief at the pump takes far longer because physical barrels move much more slowly than their digital counterparts. And gas stations historically raise prices like rockets when crude costs spike but lower them like feathers to protect their margins when oil finally slides.
3. Governing the unknown: On Wednesday, the Bank of Canada’s summary of deliberations from the Governing Council’s most recent meeting will show what led to their decision to hold its key interest rate at 2.25 per cent.
The summary will highlight how central bank policymakers are weighing the energy shock, a soft domestic economy and uncertainty around U.S. trade policies. In one interaction with media last week, U.S. President Donald Trump said the following about the United States-Mexico-Canada Agreement, which is up for mandatory review in July:
- “We do better without that agreement.”
- “I would rather not have the agreement but I may sign it.”
- “I view it as possibly expiring immediately.”
Alrighty then. Negotiations will undoubtedly extend past the July 1 deadline to preserve the core “pillars” of the continental trade pact – as senior U.S. trade officials describe them – and could result in a cycle of rolling annual reviews while long-term extension talks continue. (There’s a reasonable likelihood that nothing will be resolved until after Trump leaves office, Mark Rendell and Steven Chase write).
The bank isn’t really positioned to account for political unknowns, and it’s mostly looking past immediate, war-driven pocketbook strains.
“Energy prices have continued to drive headline inflation higher, but there’s nothing the BoC can do about global oil prices,” RBC economists Nathan Janzen and Abbey Xu wrote in a note to clients on Friday.
The central bank would be far more concerned about a broadening of price pressures beyond directly impacted energy prices, the economists wrote. But underlying measures, which strip out volatile food and fuel shocks, have been clinging closer to the bank’s 2 per cent inflation target. The BoC’s next rate decision is on July 15.
4. Before the bell
» Vroom: BlackBerry’s first-quarter results will mark its first update since chief executive John Giamatteo declared the company’s two-year restructuring officially over. After turning a surprise profit last quarter, management is pitching BlackBerry as a revived growth company.
BlackBerry’s embedded QNX software is cementing the company’s position as the dominant player in the expanding automated and driver-assisted vehicle market, ending last year with a record $950-million backlog in future royalties. Investors have driven up the company’s stock more than 100 per cent this year.
Maybe it’s just my algorithm, but flip phones seem to be mounting a comeback. If a hardware maker wants a guaranteed win, pair a curated business brief with a real keyboard. Let’s call it BB² and start counting the money.
» Vroom: High pump prices are expected to drive strong results for Alimentation Couche-Tard Inc. later today as consumers adopt more frequent, smaller refuelling habits – a sign households are having trouble managing bills from week to week.
5. Boom or bust: Canada’s upcoming April Survey of Employment, Payrolls and Hours takes the stage on Thursday as economists look to see if it laid the groundwork for May’s surprise 88,000 hiring boom.
Unlike the timelier Labour Force Survey, which relies on household interviews, the SEPH report pulls data straight from actual business payrolls – a key reality check to see if company books truly match that spring optimism.
Charted
Danger zone
Between the mega IPO of SpaceX and the tentative peace deal with Iran, investor enthusiasm for stocks has put a key valuation metric within spitting distance of its worrying all-time high, The Globe’s Jason Kirby writes.
The Shiller price-earnings ratio for the S&P 500, which captures a longer-term view of corporate earnings power than conventional valuation metrics, now sits at 41.3, just a notch below the 44.2 level reached in December, 1999. That, of course, was the peak of the dot-com bubble.
By comparison, over the past century, the ratio average was roughly 19.
😬
Barkitecture
A lot of thought went into this as far as clearances, heights and the design.
— Adam Brown, human to golden retrievers Moose and Maverick
Doggy spas and custom litter boxes: The fetching new designs behind caring for our pets.
Morning update
Global markets eased as investors assessed the latest round of U.S.-Iran negotiations for signs of progress toward resuming shipping through the Strait of Hormuz.
Wall Street futures were muted as U.S. markets return from holiday. while TSX futures edged higher.
Overseas, the pan-European STOXX 600 was down 0.04 per cent. Britain’s FTSE 100 gained 0.25 per cent as Prime Minister Keir Starmer announced he will resign. Germany’s DAX gave back 0.2 per cent and France’s CAC 40 dropped 0.69 per cent.
In Asia, Japan’s Nikkei closed 1.55 per cent higher, while Hong Kong’s Hang Seng declined 0.65 per cent.
The Canadian dollar traded at 70.54 U.S. cents.